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Gradual damage: what it is, what it isn’t and what makes an acceptable claim

A few weeks ago, Fair Go covered the experience of a couple insured with State Insurance who claimed for water damage to their kitchen floor. The damage was caused by water leaking from a hot water pipe. The claim was accepted as gradual damage and although State paid out the maximum amount payable for damage of this kind ($2,500, less excess), the couple was unhappy to learn that the sum they received covered about half the total cost of repair.

The case highlighted that gradual damage remains a grey area in insurance. On Sunday, IAG claims expert Chris Kiddey joined Newstalk ZB presenter Peter Wolfkamp on his show, Sunday Mornings with The Resident Builder, to take listeners’ questions on gradual damage and explain how it applies in real-life scenarios drawing on his experience handling claims of this kind.

Below is a summary of what was discussed on the show, but if you missed out on asking Chris a question on gradual damage, now’s your chance. Use the comments section below to submit your query and we’ll do our best to respond to you within 24 hours.

“hidden rot, hidden mildew or hidden gradual deterioration, caused by water leaking from an internal:

tank, that is plumbed into the water reticulation system of the home and is permanently used to store water, or

water pipe, or

waste disposal pipe, installed at the home.”

… and here’s what you’re covered for under State’s home comprehensive policy:

hidden gradual damage to the home that occurs and is discovered while you occupy the home, during the period of cover, and

any part of the home that isn’t directly affected but must be removed, damaged or destroyed to locate the cause of the hidden gradual damage, as long as we’ve given our permission first (we won’t unreasonably withhold our permission).

What you’ll get:

The most we’ll pay during an annual period is $2,500.”

Chris says the key is to consider nature of the damage rather than the cause. “It doesn’t matter whether what initiated the damage was sudden or gradual, for example a burst pipe vs a cracked pipe that continues to drip over time,” he says. “But the nature of the damage that was then inflicted on other parts of the home does matter. To use the same example of the couple’s claim that featured on Fair Go, we know the damage to their home was gradual in nature because of the softening and eventual failure of their kitchen flooring. In their case, it isn’t relevant whether the pipe leaked because it failed suddenly or whether the leak happened over time.”

However, Chris says the cause of the gradual damage is still important and is part of the definition for ‘hidden gradual damage’.

“One simple way to distinguish cause from damage is to say that cause relates to the source of the damage and, using the same scenario, nature relates to time. This means that a pipe could indeed fail slowly over time, as does happen, but if water gushes out as a result, rapidly flooding a home, the cause might have been a gradual failure of the pipe but the insurer will accept the claim for other damage that is sudden ‘in nature’.

“On the other hand in a scenario where a person over waters a pot plant and the water that overflows goes undiscovered and causes the carpet to rot underneath, in this example the damage might have a sudden cause (i.e. the pot plant being watered) but the insurer would consider the damage to be gradual in nature.”

Sudden v Gradual Damage

“This leads on to the second part of the discussion: how does an insurer decide what is ‘sudden’ and what is ‘gradual’? Most insurance policies have a section entitled ‘definitions’ where you can find a explanation for what certain terms mean. To use the plain English definitions from the Oxford English Dictionary:

Sudden: “Occurring or done quickly”

Gradual: “Taking place slowly or by degrees”

“Applied to an insurance claim, damage is considered to be gradual if it has occurred slowly or ‘by degrees’; or in other words, not ‘sudden’. As an insurer, when the term ‘gradual’ is used, we’re often asked: “How long is that then?” Unfortunately there is no set answer to that question, and while that may sound like an unsatisfactory answer, it is such because we consider every claim on its individual merits.”